What deferment means and when lenders allow it
Deferment is an agreement with your lender to skip one or more monthly payments on your auto loan without defaulting. The skipped payments are not forgiven — they are added to the end of your loan, extending the term and increasing the total interest you pay. Most lenders allow deferment only in specific hardship situations: job loss, medical emergency, natural disaster, or temporary income reduction. A few lenders offer it more freely, but the cost remains the same.
Deferment is different from forbearance, which is a temporary reduction in payment amount rather than a skip. It is also different from refinancing, which replaces your loan entirely. When you defer, you keep the same loan, the same interest rate, and the same lender — you straightforward move payments forward in time.
The lender decides whether to grant deferment. There is no legal right to it, though some state laws require lenders to consider hardship requests in good faith. The process typically begins with a phone call to your lender's customer service line or a visit to their online account portal, where you will find a hardship or deferment request form.
Key Takeaways
- Deferment lets you skip payments, but those payments are added to the end of your loan, so you pay more interest overall.
- Lenders usually require proof of hardship — job loss, medical bills, or income reduction — before they will grant deferment.
- Most lenders allow one to three months of deferment per loan, though some permit more in extreme cases.
- Deferment does not hurt your credit score the way a missed payment does, but it does not help it either.
- You must contact your lender before a payment is due; waiting until after you miss a payment makes deferment much harder to obtain.
How the deferment request process works
Contact your lender as soon as you know you cannot make a payment. Most auto lenders have a dedicated hardship department separate from regular customer service. You can find the phone number on your loan statement, on the lender's website, or by calling the main customer service line and asking to be transferred.
When you call, be prepared to describe your situation briefly and honestly. The lender will ask what caused the hardship, when it began, and when you expect to resume normal payments. They may ask for documentation: a termination letter from your employer, medical bills, a notice of reduced hours, or a bank statement showing depleted savings. Different lenders have different standards, but all of them want evidence that the hardship is real and temporary.
If the lender approves deferment, you will receive a written agreement stating how many payments you can defer, the new due date for each deferred payment, and the new loan end date. Read this carefully. Some agreements allow you to defer again later if needed; others are one-time only. Some charge a deferment fee (typically $50 to $150); others do not. The agreement will specify whether interest continues to accrue on deferred payments — it almost always does.
What happens to your loan timeline and total cost
When you defer a payment, that month's interest still accrues. The payment you skip is moved to the end of your loan, and interest on that payment accrues as well. If you defer three $400 payments on a loan with 6% annual interest, you are not just pushing $1,200 forward — you are also paying roughly $18 to $36 in additional interest on those deferred payments, depending on how long they sit at the end of your loan.
Your loan term extends by the number of months you defer. If you had 48 months remaining and you defer three months, you now have 51 months remaining. Your monthly payment amount stays the same unless you renegotiate the loan, so the extra months mean extra total payments.
The exact cost depends on your interest rate, the size of your payment, and how many months you defer. A rough example: deferring one $350 payment at 5% interest costs you roughly $10 to $15 in extra interest. Deferring six payments costs you roughly $60 to $90 in extra interest. Your lender can calculate the exact figure before you agree.
How deferment affects your credit and your loan status
Deferment does not appear on your credit report as a negative mark. It does not trigger a late payment report the way a missed payment does. From the credit bureau's perspective, you are current on your loan because you have an agreement with the lender. Your credit score should not drop because of deferment alone.
However, deferment does not help your credit either. It does not show up as a positive action. Your credit score remains where it was before you requested deferment. The benefit is that it does not make things worse — which is why deferment is preferable to straightforward missing a payment.
Your loan status during deferment is "current" or "in deferment," depending on how your lender reports it. You are not in default, and the lender cannot repossess your vehicle as long as you follow the deferment agreement. However, if you miss a deferred payment when it comes due at the end of your loan, that missed payment will be reported to credit bureaus just like any other late payment.
Limits on how many times you can defer
Most lenders allow deferment once per loan, for a total of one to three months. Some allow it twice, or up to six months total. A few lenders with more flexible hardship programs allow more, but this is uncommon. Check your loan documents or ask your lender directly what their deferment limit is.
Once you have used your deferment allowance, you cannot defer again on the same loan unless the lender makes an exception for a new, separate hardship. If you face a second financial crisis, you will need to explore other options: refinancing, loan modification, forbearance, or in extreme cases, selling the vehicle and paying off the loan.
The limit exists because lenders want to avoid a situation where a borrower perpetually defers payments. Deferment is meant to bridge a temporary gap, not to become a permanent payment plan.
Alternatives if deferment is not available or not enough
Forbearance reduces your payment amount for a set period rather than skipping it entirely. If you can pay $200 instead of $400, forbearance might work better than deferment. Like deferment, forbearance extends your loan and costs you interest, but it keeps you making progress on the principal.
Loan modification is a permanent change to your loan terms: a lower interest rate, a longer term, or both. This requires the lender's agreement and usually happens only if you refinance with a different lender or if your current lender offers it as part of a hardship program. Modification is not temporary like deferment; it changes your loan for the rest of its life.
Refinancing means taking out a new loan to pay off the old one. If your credit score has improved or interest rates have dropped, refinancing can lower your monthly payment or shorten your loan term. However, refinancing requires a new process and a credit check, and you may not may have access to if your hardship has damaged your credit.
Selling the vehicle is an option if the car is worth more than you owe. You can sell it privately or to a dealer, use the proceeds to pay off the loan, and avoid further payments. This works only if you have positive equity; if you owe more than the car is worth, you would need to cover the difference out of pocket.
How to prepare before you call your lender
Gather documentation before you contact the lender. Have your loan account number ready, your current payment amount, and your remaining loan balance. If you are requesting deferment due to job loss, have a termination letter or a screenshot of your final pay stub. If it is a medical hardship, have a bill or an explanation letter. If it is reduced hours, have a letter from your employer or recent pay stubs showing the reduction.
Write down what you want to say before you call. Explain the hardship clearly and briefly, state when you expect it to end, and ask specifically how many months of deferment the lender can offer. Do not exaggerate or invent details; lenders have heard most hardship stories and can often tell when something does not add up.
Ask the lender to send the deferment agreement in writing before you agree to anything. Do not rely on a verbal promise. Read the agreement carefully, note the new payment dates, the new loan end date, any fees, and whether you can defer again later. If you do not understand something, ask the lender to explain it before you sign.
Frequently Asked Questions
Will deferment show up on my credit report?
Deferment itself does not appear as a negative mark on your credit report. You remain current on your loan. However, some lenders may note "in deferment" on your account, which a future lender might see when you explore for new credit. The impact on future lending is usually minimal if deferment was approved and you follow the agreement.
What happens if I cannot pay the deferred payments when they come due?
If you miss a deferred payment when it reaches the end of your loan, it will be reported as a late payment to credit bureaus. This can damage your credit score and may trigger repossession proceedings. Contact your lender when ready if you know you cannot make a deferred payment; they may offer forbearance or another option at that point.
Can I defer my payment if I have already missed one?
It is much harder. Lenders prefer to grant deferment before a payment is missed. If you have already missed a payment, the lender may refuse deferment or require you to bring the account current first. Always contact your lender before a payment is due, not after.
Does deferment mean I do not have to pay insurance or registration?
No. Deferment covers only your loan payment. You are still responsible for car insurance, property taxes, registration fees, and maintenance. If you cannot afford these, deferment will not help. Some states allow you to suspend registration if the vehicle is not in use, but you should check your state's rules.
Can I refinance my loan while it is in deferment?
Yes, but it is complicated. Most lenders will refinance a loan in deferment, but they may require you to bring the account current first or to pay the deferred amount upfront. Ask your refinancing lender what their policy is before you explore. Refinancing during deferment can be a way to reset your loan and avoid the extended term that deferment creates.